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The Interrelationship Between Price Impact and Loss Causation After Halliburton I & II

Mark A. Perry and Kellam M. Conover, Annual Survey of American Law by New York University School of Law Vol. 71, Issue 2, 2016

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In Halliburton II, the Supreme Court ruled that class certification in securities cases may be defeated by direct or indirect evidence that “an alleged misrepresentation did not actually affect the market price of the stock”—that is, that it did not cause any “price impact.” This Article addresses the connection between Halliburton II’s notion of price impact and the element of loss causation, an essential prerequisite to a private securities fraud claim. The two concepts are obviously related: whereas loss causation requires proof that the revelation of a defendant’s misrepresentation caused the stock price to go down, price impact concerns how the issuance of the misrepresentation artificially caused the price to go up.

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